Mezzanine finance, Equity and Joint Ventures
Typically used by property developers, development finance allows the construction, conversion or renovation of a property of any size. A development finance arrangement can cover all costs from purchase (or refinance), to interest, build costs and even fees. At Enness we can obtain all kinds of development loans on residential, commercial or mixed used schemes including Mezzanine, Equity and Joint Venture facilities to name a few.
Mezzanine Finance is often used to secure supplementary funding of development projects. It’s a general term that refers to any financing vehicle (debt or equity but typically issued by private sector participants) that bridges the gap between senior debt and sponsor equity.
Mezzanine Finance is often secured by a second ranking or second charge loan (that is, ranking subordinate to the first mortgage lenders) Traditional mezzanine financiers are not entitled to receive returns on their investments until senior debt holders are fully compensated.
In a development project, Equity financing refers to the provision of capital through the sale of shares. Considered the riskiest form of real estate funding, shareholders seek high returns for their investment. However, investors benefit from the profits that are generated by the rising market value of the property (over and above the cost of any outstanding loans).
Joint Venture (JV)
Joint Ventures (JV) are a popular way of allowing people to invest into commercial real estate. They allow parties to pool capital in way that shares both the risk and the potential equity upside of property investments. Financing is flexible, and JV structures can accommodate different financial contributions from each partner. The model is increasingly common where one party has local knowledge or expertise whilst the other has equity to invest.
Every development is as unique as its gearing profile and our experienced brokers are on hand to give you advice at every step of your development journey.